Overall, the industry saw COVID-19 claims to the value of R10.10 billion in 2020. There were 422 894 members of medical schemes infected with COVID-19 in 2020, and out of that number, 383 585 recoveries, representing a mortality rate of 3.02%. These numbers are based on data from 73 schemes, representing 99.84% of medical scheme beneficiaries.

Regulating during a pandemic

Through various concessions for medical schemes, the CMS allowed for the utilisation of personal medical savings accounts to offset contributions, the relaxation of credit policies, contribution holidays and lower future contribution increases.

As a result, 19 914 members were granted contribution deferrals to the value of R586.90 million, while 16 654 members received relief through their personal medical savings accounts to the value of R180.11 million.

The CMS also extended a hand to small, medium and micro-sized enterprises (SMMEs) with less than 200 employees, allowing schemes to make payment arrangements with these businesses in order to protect their employees’ cover. This allowed 30 725 members to receive relief through rule amendments and the impact was R133.31 million. A further 5 447 members received other types of relief such as debt policy relaxation to the value of R53.68 million.

The medical schemes industry

The number of medical schemes fell by two to 76 registered schemes, as a result of two mergers. These 76 schemes had a total subscription of 8.89 million beneficiaries in 2020, down from 8.99 million in 2019 – a year-on-year decrease of 1.15%.

The average age of medical scheme beneficiaries in 2020 was 33.4 years compared to 33.04 years reported in 2019, with the average age of female beneficiaries at 34.5 years and that of males at 32.2 years. The pensioner ratio increased slightly to 8.9%, with increases in both males and females.

Healthcare utilisation

The COVID-19 pandemic caused a decrease in healthcare utilisation and expenditure in 2020, due to the varying levels of lockdowns and cancellation of elective procedures and services. The decrease in screening activities during 2020 may also affect downstream costs as early detection normally results in lower costs and better clinical outcomes in the long-term.

Healthcare expenditure on benefits decreased to R178.04 billion, 3.81% down from the 2019 reported amount of R185.1 billion, while hospital expenditure saw a decline of 8.38% between 2019 and 2020, from 68.4 billion to 62.7 billion. The average amount paid per beneficiary for hospital services also decreased by 8.45% to R7 052.00, while over 92% of this expenditure went to private hospitals.

There were also less visits to the doctor as the amount claimed by General Practitioners (GPs) decreased by 10.07% from 10.3 billion in 2019 to 9.21 billion in 2020. There was an overall decline in the amounts paid toward specialists, hospitals, general practitioners, dentists, and dental specialists, 2.26%, 8.83%, 10.07%, 7.19%, and 5.52%, respectively. Despite this, hospital visits by GPs saw a 15% increase in cost, with an average of R1 044.94 per event in 2019 to R1 203.43 in 2020, accounting for 14% of the total expenditure on GPs. Out-of-hospital visits costs increased from an average of R404.62 in 2019 to R424.59 in 2020.

Caesarean sections increased by 7.30% from 651.83 in 2019 to 699.40 in 2020.

Expenditure on medical specialists decreased by 2.2%, from R13.4 billion in 2019 to R13.1 billion in 2020. The average expenditure per event in-hospital increased by 10.99% from R1 549.13 2019 to R1 719.41 in 2020. The average expenditure per event out-of-hospital increased by 4.28% from R1 185.57 in 2019 to R1 236.31 in 2020.

True to form, the only specialist service that increased during the period under review was pathology services, which amounted to R11.6 billion in 2020.

Medicines (and consumables) dispensed by pharmacists and providers other than hospitals amounted to approximately R29.43 billion, representing an increase of 3.73% compared with R28.3 billion in 2019.

Overall, risk benefits paid per beneficiary decreased slightly by 4.31% from R18 791 in 2019 to R17 980 in 2020, and the average spent from medical savings accounts pabpa, increased by 0.04% to R2 029.63.

Prescribed Minimum Benefits

Prescribed Minimum Benefit expenditure, consisting of risk and savings expenditure amounted to R92.4 billion in 2020. As a percentage of total benefits paid, PMB expenditure accounted for 51.9% of benefits paid in 2020, up from 51.2 % in 2019. The cost of PMBs is driven by the beneficiary profile determining the level of cross-subsidisation between the young and the old; the sick and the healthy; the prevalence of chronic conditions and disease burden; and the expenditure on treatment, which is strongly linked to contracting between schemes and providers.

Non-healthcare expenditure

Gross non-healthcare expenditure (NHE) for all medical schemes at the end of 2020 was reported at R17.14 billion, an increase of 3.55% from R16.55 billion in 2019.

Administration expenditure grew by 3.67% to R14.35 billion from R13.84 billion between 2019 and 2020. Administration expenditure is the biggest component of NHE (83.73%), followed by broker fees and other distribution costs (14.81%) and impaired receivables (1.46%).

Administration and co-administration fees paid to third-party administrators were the main component of Gross Administration Expenditure (GAE). It grew by 3.85% to R10.36 billion in 2020 from R9.97 billion in the previous year. These fees represented 81.08% of the GAE of schemes which incurred this expenditure in 2020 (2019: 81.06%).

Broker costs include all broker service fees (or broker commissions) and other distribution costs. Broker costs increased by 3.63% from R2.45 billion in 2019 to R2.54 billion in 2020 (2019: 9.19%).

Net healthcare results and impact on reserves

The net healthcare result for all medical schemes combined reflected a surplus of R19.93 billion in 2020 (2019: R1.03 billion surplus). The improved performance is because of the lower utilisation of benefits during the pandemic.

The 2020 industry solvency ratio stands at 44.55% (2019: 35.61%), and exceeds the minimum required ratio of 25.00%, consistent with regulation 29 of the Medical Schemes Act (131 of 1998).

The CMS Industry Report can be downloaded here.